October 28, 2010

THE INTERSECTION OF HOLLYWOOD AND THE INDIAN FILM INDUSTRY: Implications of Hollywood/"Bollywood" Connection for Globalization of Media/Entertainment Law

By Sayuj Banerjee*

Off-shore legal outsourcing (or legal process outsourcing - LPO) tends to occupy the center of discussion when the topic is globalization of legal services. When it comes to outsourcing media and intellectual property law-related work, the relationship of the Indian film industry and Hollywood should not be ignored. The increasing intersection between Hollywood and "Bollywood" will act as an important factor in determining the nature and scope of future international work generated in those areas.

The relationship between Hollywood and the Indian film Industry has existed for a long time. It started from use of foreign locations in early Indian cinema, and it has extended to finance, technology and storyline. Considering its relative late emergence, the Indian film industry has grown by leaps and bounds in the last few decades. More than 1300 movies were released in India in Hindi and other regional languages last year. This number is about three times that of Hollywood’s 463 movies. The revenues generated by these movies have also increased to Rs.130 billion (US$2.8 billion) from Rs. 87.8 billion (US$1.89 billion) in 2008. However, Hollywood still dominates the global film sector, generating 90-95% of the global revenue, by virtue of movies that are individually much more profitable..

The Indian film industry has been dominated by what we call “Bollywood” (situated in Bombay – now Mumbai), i.e. the Hindi film industry. However, other regional movie industries like Tamil and Telegu have also seen substantial development over the years. With globalization, the Indian film industry and Hollywood have influenced each other to give birth to a new genre of films and filmmakers. What makes the film industry unique relative to other sectors are the financial collaborations and ventures emerging from both ends. This includes not only finance, but also a substantial exchange of styles and artistic trends between the two countries. However, the interaction has not always been a smooth ride. Certain legal, social and creativity-related factors create differences between the two industries. On legal front, this calls for intervention on the part of government and judiciary to remove the unnecessary hurdles. On the other hand, more joint ventures between Hollywood and Indian film industry will generate a lot of legal work in the fields of copyright protection, export-import policy and other civil matters.

Hollywood’s Role in the Indian Film Industry

Hollywood films made inroads into the Indian film industry long ago. However, those films were mostly released at a belated date in India. There was a clear cultural gap between the Hollywood movies and Indian viewers. Additionally, rampant piracy in the form of “Video Cassettes” made Hollywood films unprofitable in India. Other factors that deterred the growth of Bollywood into a professional industry have included:

Fragmentation– the Indian film industry is a group of various regional industries and not a single concept. This reduces the marketability and profitability of films in India.

Narrow thinking – creativity was limited to making “popular/ idealistic films” while social and political issues were ignored,

Lack of management of funds – production funds were not raised and documented in a proper manner, thereby causing wastage,

Lack of commercial exposure globally – films were made keeping “Indian public” in mind, and not international viewers, and

Restrictive Approach in Foreign Investment Norms – presence of limitations on foreign holdings in Indian production companies, and requirements of government approval, discouraged foreign investors.

With the gradual liberalization of the Indian economy since the 90’s, more Hollywood movies have been released in India. We also have seen an increase in financing of Indian films by Hollywood producers. Columbia Tristar's "Saawariya," was released in 2007 as the first Hollywood-produced Bollywood film. It opened the gates for Warner Bros., Disney and Fox to finance their own Bollywood movies. This includes animated comedy, such as "Roadside Romeo," a Disney co-production with iconic Bollywood banner Yash Raj Films, in 2008. Fox Star Studios is producing "Dum Maro Dum," co-produced with Ramesh Sippy Entertainment. Disney is also targeting regional audiences such as Tamil and Telugu, and it has announced the production of its first films in these languages.[1]

However, the fate of some of these Hollywood-produced films thus far has not been very successful. Quite a few big-budget films like “Jaane Kahaan Se Ayi Hai,” “Saas Bahu aur Sensex,” “Chandi Chowk to China” (Warner Bros), “Saawariya” (Columbia Tristar) and “Roadside Romeo” (Walt Disney Pictures) have failed at the box office. The only exception has been “My name is Khan,” distributed by Fox Star Studios, was hugely successful in India and abroad. As another silver lining to the cloud, some recent films such as “Atihi Tum Kab Jaoge” by Warner Bros also have been hits. Also, “Thanks Maa” (distributed by Sony Pictures) was critically acclaimed and selected to be screened at international film festivals at Edinburgh, Busan, Montreal, Cannes and Palm Springs.[2]

In spite of the failure of some of these movies, certain similarities between the U.S. and India encourage joint ventures in the film industry. Both nations have a massive “movie-going” market. Also, the entertainment policies in these countries are fairly open (wide open in the U.S. due to the near absence of any significant content restrictions). This creates a free environment for creation of varied, innovative, and otherwise appealing plots. The main encouraging factor for foreign investment in Indian films is the rapidly swelling number of prospective ticket buyers. According to New York-based consulting firm McKinsey & Co., India’s middle class, with an annual per capita disposable income of $4,380 to $21,890, is expected to swell more than ten times to 583 million people by 2025.[3] Already, some experts are saying that it is currently larger than the entire population the United States. Even outside India, there are many "NRIs" (non-resident Indians), who are potential and actual viewers of Indian movies. Last but not least, the average cost of making a film in India is far less than that of Hollywood, further adding to the profitability.

One damper to Hollywood’s involvement in India has been piracy, which has only increased with the development of technology and more widespread exposure of international films among the Indian public. Piracy is also encouraged by other India-specific factors:

Deferring of movie release dates – Hollywood movies are often released in India weeks or months after they have released in the US and the UK. But while the release is delayed, the international publicity and buzz, especially on the internet, are not limited by borders, nor is the popular demand. So by the time such delayed films are released in India, most of the Indian audience already watched the movies via internet file-sharing and/or countefeit DVDs.

Technological Advancements – Developments in the field of DVDs/Blue Ray Discs and "Peer to Peer" sharing have made downloading and copying of movies extremely easy.

Low Per Capita Income - Due to low or no income, many people in India, especially students and other young people who are the target audience for most films, find it more feasible to rent a pirated DVD or download a movie rather paying to go to a movie theater. Also, a legitimate DVD version of a movie costs around 250 Rupees (about $5), whereas buying a pirated DVD costs ten times less. And of course, downloads through file-sharing are free. This huge difference in price further encourages piracy.

Piracy is also promoted by a weak or non-existent implementation of the Export-Import Policy of India. Import of any pirated films into India is specifically prohibited.[4] This includes import in any format, including videotape, VCD, LD or DVD. Indian Customs Law[5] imposes maximum jail term of up to three years on a person who is convicted of acquiring possession of such contraband, or who is otherwise found guilty of smuggling. Despite the strength of this law, the customs authorities almost never enforce it against importers of pirated motion pictures.

Another source of piracy in India is the broadcasting of unlicensed movies through cable networks. There are as many as 40,000 cable systems in India, and this huge number makes it nearly impossible to regulate their operations. The passage of amendments to the Cable Television Networks (Regulation) Act, 1995, had some effect in deterring cable piracy in India, though no actions have yet been brought under it.

The principal statute governing piracy in India is Indian Copyright Act, 1957. Under this Act, a civil suit or criminal complaint regarding copyright infringement can be initiated in a court that has jurisdiction.[6] The Indian government and various production houses have initiated several measures for better enforcement of copyright law. One such production house assigned a serial number, which was reproduced with every copy of the film made. Thus, it enabled convenient tracing of the source of a pirated copy. Also, the penalties for violation of copyright law have been increased.

In the last few decades, the development of international treaties has contributed to overseas protection of films as copyrighted work. India is also a signatory to these treaties. Some examples are the Berne Convention for the Protection of Literary and Artistic Works (1883), the Universal Copyright Convention (1952) and the Agreement on Trade Related Aspects of Intellectual Property Rights, 1994 ("TRIPS"). Under these, two kinds of protection are provided. Firstly, the works of a national of one member country are protected in another member country also. Secondly, the protection accorded to works of such foreign nationals in the other member country is similar to the protection and treatment given to its own nationals.[7] The elements of these treaties have also been incorporated into Indian Laws such as the Copyright Act, but the implementation of these changes have yet to be seen.

The foreign investment norms in India were very restrictive for the film industry until 2002, and for that reason, until then, Hollywood and overseas media players were dis-incentivized from investing in Bollywood. However, since 2002, Foreign investment in the film sector has been considerably liberalized, by allowing 100% FDI (foreign direct investment) in Indian companiesthat are involved in film financing, production, distribution, exhibition, marketing and/ or associated activities relating to the film industry.[8] However, there are no definitive laws on the issue of funding of individual film projects by foreign producers. This implies that for every individual investment in a film, as opposed to a company, the producers are required to take consent from the government. This is a cumbersome process and militates against joint ventures in film sector.

Indian Influence on Hollywood Films

India, being the second largest population in the world, has influence on the economies, art and culture of countries all around the world. Hollywood is not immune from this influence. An example is Baz Luhrmann’s 2001 musical "Moulin Rouge," a tragic romance told with "Bollywood"-influenced song and dance. Some of Indian films are released world-wide, with a good response. “My name is Khan” earned $17.6 million outside of India, which was more than its India earnings of $23.1 million.

India has not only been contributing culturally to the world, but also there has been a substantial financial contribution by Indian producers to Hollywood. This was fuelled by issues of global lack of funds after the recent financial crisis. Banks, private equity firms and hedge funds from countries such as the U.S., France, Germany and the United Kingdom had lost the courage to finance entertainment projects. These were once the main funding source for Hollywood. India was one of the least affected countries in the crisis, thanks to strenuous financial regulations and other factors. As a result, Indian investors have taken up the opportunity to invest in Hollywood projects. The outbound investment by Indian investors has been allowed by the Indian Government almost without any restrictions.[9]

One such example is Reliance Entertainment, which announced a slew of development deals with eight Hollywood-based production houses and committed $1 billion to make at least ten films by 2010. These production houses belong to famous Hollywood actors, and they include George Clooney's Smokehouse Productions, Nicholas Cage's Saturn Productions, Tom Hanks' Playtone Productions, Brad Pitt's B Entertainment, Chris Columbus' 1492 Pictures and Jim Carrey's JC 23 Entertainment.

Last year, Reliance Entertainment also announced that it had agreed to invest $825 million in Steven Spielberg's DreamWorks Studios. It also joined the ranks of large producers like Time Warner, Lions Gate Entertainment and News Corporation to bid for a stake in Metro-Goldwyn-Mayer. Followings its trail, other Indian production houses like UTV Software, Shemaroo and PVR Cinemas are also collaborating with Hollywood producers to produce American content.[10]

In addition to the above facts regarding financial resources, it may be surprising for many to learn that for quite some time, a majority of work relating to Hollywood animation films actually has been done in India. The Indian headquarters of Rhythm & Hues (R&H), a leading Los Angeles-based special effects studio, has worked in Babe, Alvin and The Chipmunks, Spider Man 2, Mummy Returns and Incredible Hulk.

Effects of Intersection on the Legal Industry

The ongoing intersection of Hollywood and the Indian film industry has its implications on legal profession also. In India until recently, media law relating to films mainly had been confined to infringement related work and compliance related work for film schedules. Due to the complexity of rules restricting shooting of foreign films, Hollywood projects require advice of Indian firms on issues such as risk exposure. However, with the increasing influence of Hollywood, the involvement of Indian legal professionals is becoming broader.

Big studios like Warner Brothers, Universal Studios, MGM, and Viacom’s MTV, as well as independent production houses, are taking legal advice from reputed law firms in India. Some of these are Nishith Desai Associates, Fox Mandal & Little, Titus & Co, and J Sagar Associates. These firms work on scripts and take the films through post-production, including naming and certification issues.

Musicals like Chicago and Moulin Rouge have been influenced by Indian musical-style filmmaking. Some other films, like Inside Man and Lord of War, have also used tracks from Hindi movies. For this, independent Hollywood agents are retaining Indian law firms to identify rights holders of original Hindi songs they want to use.

On the subject of modernization of the Indian legal system, India still needs to synchronize its entertainment laws to facilitate co-operation between Indian houses and those of other countries. Even now, there is still no clear definition of “foreign film” under any Indian statute. This creates confusion, in relation to the numerous “Hinglish” movies (Hindi films made in other countries with significant English influence) made nowadays. Indian law states that permission is required to be taken for shooting foreign films in India, from various authorities such as the Ministry of External Affairs. Unless and until the term “foreign film” is defined clearly, international filmmakers like Mira Nair and Danny Boyle may continue to be unsure as to whether their India-centric films are defined as "foreign." Also, as discussed, a lack of definite laws regarding Hollywood funding of individual Indian films makes it difficult for many foreign producers to make films in India.

Piracy is another important issue, which Indian laws should take into consideration. More emphasis should be given on implementation of existing laws like Customs Act, Copyright Act and Cable Act, for identifying and penalizing copyright infringement. Such uniformity will ensure more collaboration between Hollywood and Indian film industry. This will add a new dimension to legal services in the entertainment industry.

The problem of lack of implementation of Indian law can also be addressed by use of technology and practical steps. Movies released in 3D cannot be copied to DVDs, as they require special screens, sound systems and other equipments. Non-3D movies could be released in India simultaneously with their Western release, so that Indian viewers who want to see a film at the same time as it is being discussed and promoted on the internet and in the international media will not be encouraged to engage in piracy. Finally, movies can be released by use of internet or satellite technologies. This will help in hampering piracy, as most of the illegal physical copies are made from movie reels. However, such use of technology requires a mass-level upgrade of movie theatres, which will take time. Theatres with modern technology and 3D screens are being set up, but only in major cities.

With a better organized film industry and further co-operation with Hollywood, more legal work in the areas of drafting and negotiation of media contracts also is being generated in India. This creates demand for a new specialization in law, requiring detailed knowledge of both American and Indian copyright and entertainment laws. Also, copyright infringement disputes at an international level could be handled by this specialized group of lawyers. Considering the prospect of legal and professional co-operation between Hollywood and India, we can hope for a more unified and structured film industry, with adequate legal protection, in the coming years.

Recently, some of the demand for entertainment-related legal work has been handled by offshore legal outsourcing companies, often called legal process outsourcing companies or LPO providers. An example of a company handling legal outsourcing of entertainment-related work is SDD Global Solutions, headquartered in Mysore, Karnataka, but with other offices in Bangalore, New York, and London. SDD Global has done high-end legal work (such as legal drafting, and legal research and analytics) for many of the top companies in the film and television business, including Sony Pictures, HBO, 20th Century Fox, Channel 4, Media Rights Capital (Hollywood's largest independent film and television studio), and countless others.

With the growing intersection of the Western and Indian film industries, it seems that a new and large sector of legal services specialization in India is currently in the making.

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* Sayuj Banerjee is a lawyer at the high-end Indian legal outsourcing company, SDD Global Solutions. At SDD Global, which is the only Indian legal outsourcing company managed by a U.S. law firm, and which has offices in Mysore, Bangalore, New York, and London, Sayuj has worked on high-profile matters for major international media clients. After graduating with honors in 2008 from one of India's top law schools, the National University of Juridical Sciences (NUJS), Sayuj joined the mergers and acquisitions team of a leading India law firm, Economic Laws Practice. Subsequently, he also worked as a practicing advocate in the Calcutta High Court. Sayuj has developed significant expertise in drafting corporate transaction agreements, performing due diligence, preparing litigation related documents, and arguing matters before the court. Sayuj’s favorite area of work is intellectual property rights, and he has done substantial work in European patent law. His interest in learning and mastering media law and copyright law led him to join SDD Global Solutions, recently ranked as the #1 outsourcing company in India, and #2 in the world, out of over 2,700 companies evaluated, according to the 2010 survey of 6,547 clients by the Black Book of Outsourcing.